In re: Jason S. Montclare, Esquire

1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

2 Opinion Number:

3 Filing Date: June 16, 2016

4 NO. S-1-SC-34920

5 IN THE MATTER OF
6 JASON S. MONTCLARE, ESQUIRE

7 An Attorney Licensed to
8 Practice Before the Courts
9 of the State of New Mexico

10 PUBLIC CENSURE

11 Jane Gagne
12 Albuquerque, NM

13 for Disciplinary Board

14 Jason S. Montclare
15 Alamogordo, NM

16 Respondent
1 OPINION AND PUBLIC CENSURE

2 DANIELS, Chief Justice.

3 {1} Attorney Jason S. Montclare accepted a flat fee from a client in the form of real

4 property and transferred a half interest in that property to his legal assistant before he

5 had fully earned it, making him unable to return the unearned portion when he was

6 later discharged before completion of the case. Montclare’s actions violated Rule 16-

7 105 NMRA, Rule 16-108 NMRA, and Rule 16-115 NMRA of our Rules of

8 Professional Conduct. We write to issue a public censure and to clarify the rules

9 pertaining to nonmonetary flat fees.

10 I. BACKGROUND

11 {2} Montclare agreed to represent Wolfgang Bohm, the complainant, in a child

12 support enforcement action brought by the State of New Mexico Human Services

13 Division (State) in which Bohm had been incarcerated for failure to appear. On April

14 12, 2013, Bohm retained Montclare’s services to obtain his release from jail and

15 resolve the underlying child support action in exchange for a flat fee consisting of

16 real property located at 101 Round Mountain, Bent, New Mexico. Bohm had

17 transferred the property to Montclare on the preceding day by special warranty deed,

18 which Montclare immediately recorded with the office of the county clerk.

19 {3} Montclare commenced work on Bohm’s case and filed a motion for his
1 immediate release from custody. On May 8, 2013, the State stipulated to Bohm’s

2 release without communicating with Montclare. Bohm was released from jail the next

3 day and asked Montclare to return the property. Montclare refused, maintaining that

4 he had earned it, and instead deeded half of the property to his office manager Tracy

5 Perry as payment for her services.

6 {4} The Office of Disciplinary Counsel of the New Mexico Supreme Court

7 Disciplinary Board brought an action against Montclare on November 26, 2013.

8 Before any hearing, Montclare and Perry agreed to transfer the property back to

9 Bohm, but they were unable to reach an agreement as to how Montclare would

10 compensate Perry for her interest. The Hearing Committee of the Disciplinary Board

11 held a hearing on the merits on April 15, 2014. On June 3, 2014, the Hearing

12 Committee issued its proposed conclusion that Montclare had violated Rule 16-

13 105(A) by charging an unreasonable fee, Rule 16-108(A) by acquiring ownership of

14 client property without complying with the requirements pertaining to conflicts of

15 interest, and Rule 16-115(A) and (E) by failing to hold client property separate from

16 his own. The Hearing Committee recommended that Montclare be suspended from

17 the practice of law for six months followed by one year of supervised probation.

18 Additionally, the Hearing Committee recommended that Montclare be ordered to

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1 make restitution to Bohm by deeding the entire property back to him or by paying him

2 its appraised value.

3 {5} On June 24, 2014, counsel for the Disciplinary Board notified Montclare that

4 the transfer of the property from Bohm to Montclare was not valid because the

5 property was still in the name of Bohm’s deceased mother at the time, and

6 consequently the deed from Montclare to Perry might be void because Montclare did

7 not have a valid property interest to transfer. Nevertheless, the Disciplinary Board

8 asked that Montclare and Perry execute special warranty deeds and quitclaim deeds

9 transferring any interest they might have in the property back to Bohm to resolve any

10 possible cloud on the title that may have resulted from the invalid transfers. On

11 September 10, 2014, disciplinary counsel filed a specification of charges against

12 Montclare, alleging that by deeding a half interest in the property to Perry he had

13 violated Rule 16-504 NMRA by improperly splitting fees with a nonlawyer.

14 {6} On September 16, 2014, a Panel of the Disciplinary Board approved the

15 Hearing Committee’s proposed findings of fact and conclusions of law on the earlier

16 charges after briefing but without hearing oral argument. The Panel adopted the

17 Hearing Committee’s recommendation of a six-month suspension followed by one

18 year of supervised probation and also recommended that Montclare be required to

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1 take any necessary steps to restore clear title to the property to Bohm or, if clear title

2 could not be restored, to pay Bohm the fair market value of the property.

3 {7} Montclare requested review of the Panel’s decision by this Court on October

4 2, 2014, arguing that disciplinary counsel had not proved he had the mental state that

5 merited suspension and asking that the case be remanded to the Hearing Committee

6 for reconsideration in light of the invalidity of the transfer that was discovered after

7 the hearing. On October 17, 2014, Montclare also moved the Panel for a new hearing

8 on the same basis. Disciplinary counsel responded that the Panel no longer had

9 jurisdiction over the proceedings because Montclare had already requested review by

10 this Court. The Panel did not rule on the motion for a new hearing.

11 {8} We heard argument in this case on February 4, 2015, but ordered the matter

12 held in abeyance subject to Montclare commencing fee arbitration with Bohm and

13 making arrangements to clear title to the property. Disciplinary counsel suggested to

14 Montclare that the additional allegations concerning fee-splitting could be resolved

15 by consenting to discipline.

16 {9} On February 9, 2015, Montclare entered into a conditional agreement in which

17 he admitted to violating Rule 16-504(A) by sharing legal fees with a nonlawyer and

18 consented to a formal reprimand. The Panel approved the consent agreement on

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1 March 19, 2015. Montclare then sought to withdraw from the consent agreement, and

2 on April 3, 2015, he petitioned this Court for a hearing in the matter. This Court

3 denied the petition.

4 {10} During this period, Bohm was attempting to sell the property but was unable

5 to close the sale because he did not yet have clear title. Montclare subsequently

6 quitclaimed his interest in the property to Bohm and attempted to reach an agreement

7 with Perry to purchase her half interest in the property so that he could deed it back

8 to Bohm, but he did not have the funds to pay the price Perry requested. Despite

9 repeated extensions of time and admonitions from disciplinary counsel to make

10 arrangements to purchase Perry’s interest, Montclare still failed to do so.

11 {11} On September 25, 2015, disciplinary counsel moved this Court for an order to

12 show cause as to why Montclare should not be held in contempt for violating the

13 February 4, 2015, order by failing to take action to clear title to the property. The

14 pending sale of the property was terminated due to the cloud on the title, and Bohm

15 refused to participate in fee arbitration.

16 {12} After oral argument, we declined to hold Montclare in contempt but adopted

17 the findings and conclusions of the Disciplinary Board Panel regarding the underlying

18 violations of our Rules of Professional Conduct. We ordered that Montclare receive

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1 a public censure and be suspended from the practice of law for a period of six months,

2 which suspension would be deferred on the condition that he purchase Perry’s interest

3 in the property on or before February 8, 2016, so as to return clear title to Bohm. The

4 order specified that upon Montclare’s delivery of full payment to Perry, disciplinary

5 counsel would make arrangements to obtain and deliver a quitclaim deed from Perry

6 renouncing her interest in the property. Montclare was also ordered to attend an ethics

7 CLE and pay the costs of the disciplinary proceedings. This opinion serves as his

8 public censure and shall be published in the State Bar of New Mexico Bar Bulletin.

9 II. DISCUSSION

10 {13} In reviewing disciplinary proceedings, we defer to the Hearing Committee on

11 factual matters but review legal conclusions and recommendations for discipline de

12 novo. In re Yalkut, 2008-NMSC-009, ¶ 16, 143 N.M. 387, 176 P.3d 1119.

13 {14} “A lawyer shall not make an agreement for, charge or collect an unreasonable

14 fee.” Rule 16-105(A). “[N]on-refundable unearned fees are unreasonable.” Yalkut,

15 2008-NMSC-009, ¶ 26. A flat fee for future legal services is not prohibited, but it

16 cannot be considered as earned when paid and must be held in trust until earned. See

17 id. Additionally, “lawyers must inform their new clients of the basis upon which they

18 will compute the amount of fee earned . . . and maintain records that will enable them

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1 to determine the ongoing status of the fee, even when the fee arrangement is for a flat

2 fee.” Id. (omission in original) (internal quotation marks and citation omitted). An

3 attorney who is discharged is only entitled to recover the reasonable value of services

4 rendered prior to the discharge, even if the agreement was for a flat fee and the

5 discharge is without cause. Guest v. Allstate Ins. Co., 2010-NMSC-047, ¶¶ 49, 51,

6 149 N.M. 74, 244 P.3d 342. Upon termination, an attorney must refund to the client

7 “any advance payment of fee or expense that has not been earned or incurred.” Rule

8 16-116(D) NMRA.

9 {15} Montclare did present billing records to the Hearing Committee showing the

10 time he spent on the case and calculating the fee he maintained he had earned. The

11 Committee found that these calculations were not credible and consequently that

12 Montclare had not earned the full value of the property. We defer to these findings

13 and conclude that, because Montclare did not earn the full value of the property

14 before transferring an interest to Perry and thereby making it nonrefundable, the

15 property was an unreasonable fee in violation of Rule 16-105(A).

16 {16} We clarify that the acceptance of a flat fee in the form of real property is not

17 in itself contrary to our Rules of Professional Conduct. An attorney may accept a

18 nonmonetary fee, but regardless of the form it takes any fee must be reasonable and

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1 must be refundable until it is fully earned.

2 {17} Additionally, an attorney must minimize any potential conflict of interest with

3 a client by ensuring that

4 (1) the [terms of a nonmonetary fee agreement] are fair and
5 reasonable to the client and are fully disclosed and transmitted in
6 writing in a manner that can be reasonably understood by the
7 client;
8 (2) the client is advised in writing of the desirability of seeking and
9 is given a reasonable opportunity to seek the advice of
10 independent legal counsel on the transaction; and
11 (3) the client gives informed consent, in a writing signed by the
12 client, to the essential terms of the transaction and the lawyer’s
13 role in the transaction, including whether the lawyer is
14 representing the client in the transaction.

15 Rule 16-108(A).

16 {18} Montclare argued that it was Bohm’s idea to use the property to pay for legal

17 services and that he was doing Bohm a favor by accepting the offered real estate

18 because other attorneys had declined the case and Bohm would otherwise have been

19 without representation. Regardless of the truth or accuracy of Montclare’s assertions,

20 they do not relieve him of his responsibilities to properly advise his client and to

21 ensure that the terms of any transaction are fair and fully disclosed. Attorneys often

22 contract with clients in difficult situations because it is precisely those circumstances

23 that give rise to the need for an attorney. But our Rules of Professional Conduct

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1 prevent attorneys from taking advantage of any such desperation to the detriment of

2 the client. Rule 16-108 “was promulgated to ensure that transactions between clients

3 and attorneys remain fair and reasonable and to ensure that attorneys do not exercise

4 an unfair advantage over their clients.” Guest v. Allstate Ins. Co., 2009-NMCA-037,

5 ¶ 23, 145 N.M. 797, 205 P.3d 844, reversed on other grounds by Guest v. Allstate Ins.

6 Co., 2010-NMSC-047, ¶ 72. By agreeing to accept Bohm’s property without advising

7 him to seek independent counsel, without obtaining his informed consent, or without

8 ensuring that the terms of the transaction were fair and reasonable to Bohm,

9 Montclare violated Rule 16-108(A).

10 {19} Finally, after agreeing to accept the property as a fee, Montclare failed to

11 properly safeguard it until he had earned its full value. Any retainer or flat fee not yet

12 earned must be safely kept and held in trust for the client, separately from the

13 lawyer’s own property. Rule 16-115. Money that belongs to a client must be

14 deposited in a separate trust account and withdrawn only as fees are earned or

15 expenses are incurred. Rule 16-115(A), (C). Our rules are not so specific regarding

16 nonmonetary property, but it must be identified as belonging to the client,

17 safeguarded, and promptly returned when the client is so entitled. Rule 16-115(A),

18 (D). One way to accomplish this when a fee takes the form of real property would be

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1 to have the deed held in escrow by a neutral, third party until the attorney has earned

2 the full value of the property. But it would not necessarily be an ethical violation to

3 transfer the title into the attorney’s name and record the transfer, even though the

4 attorney is not yet entitled to ownership of the property, because in the absence of a

5 third-party escrow these steps might be necessary to properly safeguard both attorney

6 and client interests in the title. There would have been no violation if Montclare had

7 transferred and recorded the deed but had safely kept it and had promptly transferred

8 it back to Bohm when asked. When Montclare instead refused to return the property

9 and transferred a half interest to Perry, making him unable to return it to Bohm

10 without securing Perry’s cooperation, Montclare violated Rule 16-115(A), (D).

11 III. CONCLUSION

12 {20} We issue this public censure as a consequence of Montclare’s actions in

13 accepting a flat fee and transferring a portion of that fee to a third party before he had

14 earned it so that he was unable to refund the unearned portion when requested as is

15 required by our Rules of Professional Conduct. Because Montclare has since made

16 the required payments and filed the necessary documents to transfer all interest in the

17 property back to his former client, we do not impose the previously deferred six-

18 month suspension.

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1 {21} IT IS SO ORDERED.

2 __________________________________
3 CHARLES W. DANIELS, Chief Justice

4 WE CONCUR:

5 ___________________________________
6 PETRA JIMENEZ MAES, Justice

7 ___________________________________
8 EDWARD L. CHÁVEZ, Justice

9 ___________________________________
10 BARBARA J. VIGIL, Justice

11 ___________________________________
12 JUDITH K. NAKAMURA, Justice

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